Real estate developers are increasingly turning to discount stores to anchor shopping malls from Long Island to Los Angeles, inking deals that would have been unthinkable a decade ago, industry executives said.

Anchors – the large stores at either end of a mall – were once the exclusive province of well-heeled department stores. But as those stores have either gone out of business or merged, mall developers have been left with vacancies to fill.

Discounters had previously shied away from the confined space of shopping malls, instead preferring free-standing locations where customers could park in front and load up on everything from toilet paper to tiki torches.

But with large plots of land becoming scarce, especially in the more densely populated northeast, discounters – the likes of Wal-Mart, Target, TJ Maxx, Ross Stores and Burlington Coat Factory – are muscling in on the malls.

Caught in between are specialty retailers like Gap, Casual Corner and Limited, which want the additional customers that a discounter can bring to a mall, but worry about the inevitable price comparisons between their merchandise and that offered by the less expensive retailers.

“There is a paradigm shift that has occurred, particularly in the last year,” said Joseph J. Sitt, chairman and CEO of Thor Equities, which manages retail properties nationwide, including three malls. “Malls are no longer the domain of upscale retailers.”

Department stores still dominate the mall landscape, but their influence is waning. George Strachan, an analyst with Goldman Sachs, predicted in a recent report that discounters would grab more than one-third of the 800 anchor locations that are expected to become vacant over the next decade.

Wal-Mart is replacing J.C. Penney as an anchor in the Sunrise Mall in Nassau County, and will be a new addition at the Westfield Shoppingtown Parkway in El Cajon, Calif.

The majority of Wal-Mart’s 2,845 U.S. stores are still in strip centers; the retail giant currently operates just four mall stores.

But Tom Williams, a Wal-Mart spokesman, said malls are now in the mix of real estate properties under review. “Times change and conditions change,” he said.

Target has been at the forefront of the mall assault; its mall stores number 30 out of a total of 1,167.

Richard Green, vice chairman of mall developer Westfield Corp., said he recently signed five deals with Target, for leases in San Diego, Calif.; Los Angeles (home to two sites); Enfield, Conn.; and Wheaton, Md. “Over the next few years, you will see more and more malls anchored by mass merchants,” Green said.

While landlords typically had to kowtow to higher-end department stores by offering all types of incentives – from building costs to advertising fees – discounters are not demanding the same inducements, developers said. What they want instead is cheaper rent, a concession landlords are willing to make to avoid shelling out all those up front fees.

“A developer would typically have to write a check of $1 million to $5 million just for the privilege of having a chi-chi department store in the mall,” said Sitt, of Thor Equities. “Am I offering those types of incentives to discounters? No. And that’s making it sexier to work with them.”

When the lease on a J.C. Penney store expired in the Gallery mall in Atlanta, which is run by Sitt’s company, he surveyed customers to see whether they’d prefer a discounter to a Saks or Neiman Marcus. More than half voted for a discount store, and Sitt said he is now talking with Wal-Mart and Target about taking over the lease.

But today, as department stores lose out to discounters in the battle for consumer dollars, they wield less clout with landlords. Sitt, who also runs a consulting business, estimated that department stores’ market share has shrunk by 20 percent over the past decade.

As a result, department stores have been scaling back. J.C. Penney has closed 43 stores over the past three years, and Montgomery Ward shuttered all of its 252 stores when it went out of business in 2001.

Burlington Coat Factory has filled a number of those locations, including The Gallery in Philadelphia, a former J.C. Penney stronghold, said Ted Kraus, who acts as the retailer’s leasing agent.

“If I had proposed putting Burlington in there 10 years ago, the developer would have had a heart attack and died on the spot,” Kraus said. “But today, Burlington is sexier.”

Anchors aweigh!

Discounters like Target and Wal-Mart increasingly are replacing department stores as anchor tenants of malls. Projected changes in the make-up of malls over the next decade:

600 to 800 anchor sites opening

300 to 400 anchor sites opening in metropolitan areas

200 to 300 vacated anchor sites in metro areas expected to be taken by discount stores